Selling winners, keeping losers
A loss hurts about twice as much
Decision research finds that losing $100 feels roughly twice as bad as winning $100 feels good. That imbalance quietly steers what traders do next.
So winners get sold and losers get kept
Selling a winner feels good, so it happens early. Selling a loser makes the loss real, so it gets put off. Studies of real brokerage accounts find exactly this pattern, and it costs money.
Ask the question that matters
Not 'am I up or down on this?' but 'would I open this trade today, at this price?' If the answer is no, the price you paid is not a reason to stay in.
Check yourself
You hold two coins, one up 20% and one down 20%, and you need cash. Which does loss aversion push you to sell?
- The winner, keeping the loser
- The loser
- Half of each
Show the answer
The winner, keeping the loser — Banking a win feels good and selling a loser makes it final, so the bias says: sell the winner. Whether to keep either should depend on what you expect next, not on what you paid.